A Test of Resilience
Resilient economies, the stability of the Baltic states, and Poland’s democratic comeback – there are plenty of reasons why the region of East-Central and Southeast Europe still ranks high in international comparison. Yet, in many countries, deepening political polarization and the erosion of democratic consensus represent a litmus test, as these pressures are creating space for illiberal leadership. And, for the first time, the BTI classifies one country in the region as an autocracy.
East-Central and Southeast Europe remains the best-performing region in the BTI. Six countries rank among the global top 10 in terms of democratic quality. The regional average for economic transformation has even ticked upward, thanks in large part to the ongoing post-pandemic recovery and easing inflationary pressures noted in the BTI 2024.
Are these signs of lasting stability? Only to a point. Poland’s democratic resurgence under the Tusk government helps brighten the overall picture. In all three of the BTI’s core dimensions, Poland ranks among the most improved countries worldwide. Still, the government faces major hurdles in translating those early gains into long-term progress. Meanwhile, the downward slide seen in recent years has continued in Hungary, Slovakia and especially Serbia. After repeated electoral irregularities and heavy infringements on the freedom of expression, Serbia has become the first country in the region to be classified by the BTI as an autocracy.
Political polarization is intensifying across the region. Relations between neighboring countries also remain fraught – and, in some cases, are growing even more contentious, as seen in ongoing disputes between Kosovo and Serbia as well as North Macedonia and Bulgaria over issues of cultural identity. Economically, most countries are now struggling with rising public debt and widening budget deficits. The NATO member states – that is, all but three countries in the region – have also committed to significantly boosting their defense spending. But in the wake of shifting U.S. policies under the Trump administration, a Western orientation becomes an increasingly blurred target.
Political transformation
A roof collapses, and so do hopes for democracy
Some countries in East-Central and Southeast Europe continued on a steady course of democratic consolidation. Albania, for example, extended its decade-long positive trajectory, reaching its highest level of democratic development to date. A major milestone was the launch of EU accession talks in 2022. Reforms spearheaded by long-serving Prime Minister Edi Rama and his Socialist Party (PS) to tackle organized crime and strengthen law enforcement have reinforced state authority, improved the rule of law, and enhanced the overall performance of democratic institutions. Latvia also received an even higher rating than before, reflecting its strong institutional stability.
By contrast, long-standing trends of democratic backsliding persisted in several countries – including Hungary, in particular – and worsened in Bulgaria, Slovakia, Romania and especially Serbia (–0.87 points). President Aleksandar Vučić and his Serbian Progressive Party (SNS) once again dominated political life, and he is largely responsible for Serbia’s downgrade to a moderate autocracy. The 2024 local elections were plagued by allegations of manipulation, prompting renewed boycotts by the fragmented opposition. Meanwhile, government-aligned media continued to delegitimize dissent, painting all opposition voices as traitorous. The situation escalated in November 2024, when the roof of Novi Sad’s main train station collapsed, killing 16 people. The tragedy triggered mass protests, which were still ongoing at the time of writing (August 2025). Vučić and his allies dismissed the unrest as a foreign-orchestrated attempt at a “color revolution.” Hungarian Prime Minister Viktor Orbán, meanwhile, faced his most serious political challenge in 15 years, as the fast-rising opposition Tisza party made strong gains in the 2024 European and local elections.
In Poland, the 2023 election of a government led by the Civic Coalition, under former Prime Minister and European Council President Donald Tusk, marked a clear break from eight years of illiberal PiS rule (+1.00 point). Significant progress has been made, especially in restoring the independence of public media and reestablishing the rule of law. The separation of powers has been reinstated after the PiS party had gained control of nearly all key institutions, including the executive, the presidency, parliament and parts of the judiciary. Nonetheless, the political landscape remains deeply polarized, and public trust in institutions is still low.
Slovenia has also managed at least a temporary course correction. By contrast, three other EU member states have suffered setbacks. In Slovakia, Robert Fico’s fourth term in office has taken a sharply authoritarian and pro-Russian turn. Rising political polarization reached a zenith with an assassination attempt on Fico in May 2024. In Bulgaria, seven parliamentary elections between 2020 and 2024 failed to produce a stable government. Romania’s political climate is even more volatile. For example, the first round of the 2024 presidential election was annulled after far-right outsider Călin Georgescu made an unexpected surge fueled by a massive, anonymously funded TikTok campaign, which was widely believed to have been part of a coordinated hybrid operation orchestrated by Russia.
Economic transformation
Defying the environment
Despite continued global volatility, the economies of East-Central and Southeast Europe have shown encouraging resilience. Many countries in the region weathered various challenges during the review period surprisingly well. While political backsliding in Bulgaria, Hungary and Slovakia has taken a toll on economic performance, dragging scores to new lows, nearly half of the region’s countries achieved record highs in their economic transformation indicators.
Although growth has slowed somewhat, the post-pandemic wave of inflation has eased even more sharply. Compared to Western Europe, half of the countries in the region report moderate or even low levels of public debt. Only Hungary, Slovenia and Montenegro exceed the 60% debt-to-GDP threshold. Budget deficits, however, remain a serious concern, especially in Romania (–8.6% in 2024), Poland (–6.6%) and Slovakia (–5.8%), according to IMF data. In each case, expansionary fiscal policies driven by rising social spending and public-sector wage hikes have proved unsustainable. Under pressure from the EU to meet the 3% deficit ceiling, all three governments adopted politically sensitive austerity measures. Romania’s 2025 consolidation package was particularly contentious and is currently being challenged in the Constitutional Court by the far right.
Six EU member states from the region are now part of the eurozone. Croatia was the most recent to join. It adopted the euro in January 2023 and remained within the debt threshold in 2024 thanks to a temporary exemption. Bulgaria met all accession criteria in 2024 and has been invited to adopt the euro in January 2026. Czechia, Hungary, Poland and Romania remain formally committed to euro adoption under their EU accession agreements. However, public support varies widely, and none of these countries currently meets all of the Maastricht convergence criteria.
Poland recorded the region’s most significant improvement since 2024 (+0.61 points). Its strong current account reflects robust private consumption, rising foreign investment, low unemployment and more efficient tax collection. The Tusk government has also strengthened property rights, boosted investment in renewable energy, raised teacher salaries and research funding, and launched reforms aimed at depoliticizing the university system. Slovenia has expanded social protections, increased female labor force participation, and benefited from steady macroeconomic performance and low unemployment. Montenegro, despite ongoing political turbulence, has expanded its social safety net and stabilized public finances, cutting its debt-to-GDP ratio from 107.4% in 2020 to 62.6% in 2024.
These gains are all the more notable given the geopolitical headwinds. Since the start of Russia’s full-scale war against Ukraine, most countries in East-Central and Southeast Europe have dramatically reduced their dependence on Russian natural gas. In 2021, over half of the gas consumed in the EU came from Russia; by 2022, that figure had dropped to 13%, rising only slightly, to 19%, in 2024. Several countries also made notable strides in terms of harnessing renewable energy, and Bosnia and Herzegovina, Estonia and Lithuania now exceed the EU average.
Governance
Is compromise still possible?
Perhaps the greatest litmus test for East-Central and Southeast Europe lies in the realm of governance. In a region increasingly marked by political polarization and strained cross-border relations, is inclusive, consensus-oriented leadership still achievable?
Unfortunately, the reporting period again offered numerous examples of governments either unwilling or unable to forge political consensus. In Slovakia (–0.90 points), the new administration under Robert Fico increasingly relied on fast-tracked legislative procedures to bypass public scrutiny. Ministers from the far-right Slovak National Party (SNS), in particular, refused to engage in public consultations and disregarded input from NGOs. The SNS also replaced professional leaders of cultural and environmental institutions with party loyalists, including individuals linked to disinformation networks. Historical narratives were increasingly politicized. While Fico’s government publicly honored the Red Army’s role in liberating Czechoslovakia, it pointedly avoided commemorating the 1968 Prague Spring or the 1989 Velvet Revolution. Relations with neighboring Poland, Czechia and especially Ukraine deteriorated as the government drew closer to Russia. Fico and Hungary’s Viktor Orbán now form a tandem of illiberal leaders in Central Europe, though Fico’s political foundation is notably more precarious than Orbán’s.
In Serbia (–0.47 points), the decline has primarily been driven by the erosion of a consensus on democratic development. Critics from the opposition, civil society, academia and independent media are routinely branded as “traitors” or “foreign mercenaries” – often by President Vučić himself, who has become the country’s main anti-democratic force. A shared commitment to democratic norms is also increasingly absent in Romania (–0.38). The 2024 election crisis made it clear that deep frustration with the political establishment has created space for radical, illiberal forces. The strong performance of conspiracy theorist Călin Georgescu in the presidential race, combined with the far right’s success in securing over a third of the seats in parliament, signals a growing shift among Romanian voters away from the country’s traditionally pro-European, transatlantic alignment.
Even so, most countries in the region continue to see Russia’s foreign policy as an existential threat and remain committed to the West. This view is particularly strong in Poland, where the new government under Donald Tusk has also charted a new course at home. The reintroduction of strategic policy planning, stronger accountability mechanisms, and renewed efforts to fight corruption helped Poland post a 1.64-point gain in the BTI Governance Index – the kind of leap typically only seen in post-conflict societies or countries emerging from authoritarian rule. Still, there is room for more progress. According to the BTI 2026, only the three Baltic states and Czechia qualify as having very good governance.
Outlook
Regression or liberalization?
Many countries in East-Central and Southeast Europe are at a crossroads. While Hungary under Viktor Orbán has already moved deep into the territory of illiberal rule, Serbia under Aleksandar Vučić has slipped below even the most basic democratic standards and is now governed in an authoritarian fashion. Even when democratic reversals do occur, Poland’s experience offers a sobering lesson in how slow and difficult it can be to dismantle deeply entrenched power structures. Prime Minister Tusk’s liberal government continues to face serious constraints - not least from a president aligned with the former ruling PiS party.
Bulgaria and Romania, meanwhile, face a genuine test of democratic resilience. In Bulgaria, the far-right Vazrazhdane (Revival) party has openly aligned itself with the Putin regime, and the coalition government formed in early 2025 includes the moderately pro-Russian Bulgarian Socialist Party. Nevertheless, Bulgaria joined the Schengen Area and is preparing to adopt the euro on January 1, 2026. In Romania, even though far-right parties have not entered government, the danger is no less acute. In the May 2025 presidential election, 46% of voters supported George Simion, leader of the ultranationalist Unity of Romanians (AUR) party, who campaigned on a platform closely modeled on the MAGA movement in the United States. Romania’s ability to resist the authoritarian drift will now be put to the test.
Signs of political instability are also evident in Montenegro. Still, the country appears on track to complete EU accession talks by the end of 2026. Albania, another strong candidate, aims to conclude negotiations by 2027. Despite real progress in North Macedonia in recent years, its path toward accession remains blocked by Bulgaria, with positions on both sides hardening. Bosnia and Herzegovina has also made some advances, but weak governance and deep internal divisions continue to present serious obstacles. The mixed picture among the region’s EU member states – ranging from democratic consolidation to renewed backsliding – is mirrored across the Western Balkans. Together, these developments pose a critical test for the durability of democratic governance in the region.